US interest rate hike to have minimal impact on Malaysian economy

Earlier, worries loomed among market analysts that such a move would spell further derailment for Malaysia and regional economies.

An economist with MIDF Research said there was little impact on markets as the announcement finally came but news of an imminent interest rate hike which was circulating since early this year caused a lot of volatility globally.

"As such, we expect the market to be subdued as the rise has been factored in and expected for a very long time," he told Bernama today.

The Fed finally ended a historic era of near-zero interest rates in the US that dated back to December 2008 when crisis gripped global financial markets.

However, he said as uncertainties lingered for the Malaysian economy in 2016, further downward pressure on the ringgit may persist due to low oil and commodity prices in the short-term.

Brent crude oil price fell US$1.26 to US$37.19 per barrel due to a global supply glut.

"On an encouraging note, in the mid-to-long-term period, we are expecting a better performance for the ringgit due to receding negative sentiment," he said.

At 9.00am, the local unit was quoted at 4.3115/3185 against the greenback from 4.3200/3300 on Wednesday.

Meanwhile, Affin Hwang Capital said subsequent Fed interest rate hikes would likely be gradual next year and Bank Negara Malaysia was likely to leave its overnight policy rate (OPR) unchanged at 3.25 percent throughout 2016.

"Even if the Fed were to raise its policy rate by 75-100 basis points in 2016 from the current level, the interest rate differential between the Fed's rate and Malaysia’s OPR remain wide and positive," Affin said in a note.